Investing with Impact: Becoming a ‘Responsible Steward’

Liesel Pritzker Simmons led a very different life before co-founding Blue Haven Initiative, a single family office dedicated to putting wealth to work for competitive financial returns and positive social and environmental change. Born into one of the wealthiest families in America, the public knew her as a child actress who starred in the 1995 movie A Little Princess and played the president’s daughter opposite Harrison Ford in Air Force One. In 2002, she and her brother sued their father and cousins, accusing them of misappropriating trust funds set up for the two of them. The siblings settled for about $500 million each.

Despite her wealth and the trappings of her upbringing, Pritzker Simmons was always more interested in what money could do for other people and the planet. She wanted to use her inheritance to help others in ways that could create further change. Her journey led her to impact investing.

She recently joined Katherine Klein, vice dean for the Wharton Social Impact Initiative, for an episode of the Dollars and Change podcast to talk about her work and the company. (Find more episodes here.) Listen to the podcast at the top of this page or read an edited transcript of the conversation below. 

Katherine Klein: When I read about your story, I think, “Liesel could have done a lot of things.” Help us understand the connective tissue here. As you think about your history, who you are and where you came from?

Liesel Pritzker Simmons: A lot of my motivation, and therefore choices in my life, come from trying to wrestle with the luck and fortune of being born very wealthy and what it means to be a good steward of those assets. How do you move through the world when there is this much wealth inequality? How do you mitigate that, through your actions, through how you invest, and the choices that you make?

I was an actor for most of my childhood and my early adulthood, both in film and in theater. As I got older, I started to become more aware [that] I come from this big business family and I’m going to inherit all this money. I started to spend more time thinking about what that meant than my next audition. College was when I started to become more interested and involved in international development and global markets, and what I could do with this wealth in a way that actually sparks change.

Around the time I was in college, microfinance, market-based solutions — all of those were big buzzwords in international development. I wanted to learn more about how markets, both public and private, are contributing or not to making the world a better place. Understanding that I would have assets to contribute to that conversation, not just as a philanthropist but as an investor — that really started that journey of, what’s the best use of this capital?

As a result of this lawsuit, I had total control over these assets. I didn’t have to work with anyone or get anybody’s approval in terms of how I invest. One of the [critical] things for me was [to] look at these assets holistically and say, “What is everything doing? Can we measure the social and environmental impact of how we’re investing?” It’s a way to hold myself accountable in a world that doesn’t hold wealthy people accountable for anything, really. We’ve seen snippets of that change in the last couple of years. But largely speaking, you can sort of do what you will with your assets. And I think we should have a little bit more accountability than that.

“It’s a way to hold myself accountable in a world that doesn’t hold wealthy people accountable for anything, really.”

I want to know what every single thing in my portfolio is doing, and I want to choose investments that we think are actively solving some kind of a problem. That looks very different across asset classes and across different sectors and subsectors. But when it makes sense for markets to help to scale a solution or make something more efficient or make something cheaper, let’s find those and let’s invest in them. And when it doesn’t make sense, let’s not get markets involved. Maybe there are other ways to contribute philanthropically or through civic engagement or political activism or other things like that.

I guess the through-thread is trying to be a responsible steward of these assets. I like business, and I like investing, and I think it’s really interesting and exciting. But how do you take this lens of being more accountable, and being responsible for what these assets are doing?

The acting piece is fun because it gives you a little bit of perspective. I always love it when you talk to particularly younger entrepreneurs and founders who are like, “Oh my God, fundraising is so hard. We’ve done 30 pitches this year and only raised from five of those.” And I’m like, “That’s incredible. Actors go on hundreds of auditions and are literally told in the meeting, ‘No, you’re not cute enough. Sorry.’” You get very critical feedback. And you have to do it a lot. Not everything is a success.

Klein: It has occurred to me that engaging [students] in acting and improvisation would be a great skill to give people.

Pritzker Simmons: There’s definitely a blog or a book that needs to be written around why theater is actually the best major for business. Because all you do in scene study classes, in rehearsals for plays and things like that is understand who’s got the power in the room, what their motivations are, and what they care about. You’re breaking down what people want and what people have, and the tension between those two things. [It’s] getting clear on how to get what you want or how to hold something back that you don’t want somebody else to get. There are all sorts of different techniques and all that. But ultimately, that’s what you’re doing. Clarifying those things before you walk into a board meeting or before you walk into a negotiation, I think, would serve a lot of people really, really well.

Klein: That’s fantastic. As an organizational psychologist, I’m someone who thinks about a lot of these things. But the acting piece is very helpful because it says, “How do you want to show up in the room, and who will you be?”

Pritzker Simmons: And how do you present yourself in the way that gets you what you want? I think it’s an underrated skill and an interesting one around building trust quickly. In organizational development, teams that are successful have a tendency to build trust quickly and be vulnerable in front of each other in order to get the work done. The quicker you get that, the more dynamic the team can be and can grow. If you think about it, if we’re rehearsing a play, I could have met that actor earlier that day, and then I’m in the middle of a love scene with them. You better build trust. You have to get there quick.

Klein: You founded the Blue Haven Initiative about 10 years ago. When you give the high-level elevator pitch for it, how do you describe what this initiative is?

Pritzker Simmons: We are a single-family office. A way we describe our work is we’re investors and we go for higher standards. Yes, we want to see financial return and risk-adjusted returns like any good investor. But that’s not enough. We also want the investments that we make to be actively contributing to a social or environmental outcome of some kind.

“The data can always get better, but it’s not going to make the decision for you.”

It’s been a really interesting journey. We work with a lot of fund managers and invest directly in companies ourselves. But since we’re a single-family office, we can play with long-term thinking. We can be a little bit more nuanced in what reporting and metrics we’re requiring, taking more of a management approach as opposed to, “We need the report every year,” because we’re not reporting out to other external LPs. It gives us a bit of flexibility around how we actually incorporate these things, so we’re constantly changing.

Technically, what that means is for the bulk of our assets, we are investors looking for risk-adjusted returns across a diversified asset allocation. We also give grants and do some concessionary or catalytic investing as well. Not everything that we really like has a risk-adjusted return, and so we have designated assets for that as well. We try to use all the different tools that we can.

Klein: Blue Haven Initiative describes itself as practicing informed investing for profit and purpose, and you invest across asset classes. A lot of your investments — I’m assuming a significant percentage of your wealth — are invested in publicly traded companies, public equities. How do you think about the impact and the purpose of those investments? How much purpose can you fulfill when you’re investing in publicly traded companies managed by third-party managers?

Pritzker Simmons: We do have public equity exposure in our asset allocation. About half of it is passively managed, and half is more actively managed. With our active managers, we select them based on their sustainability strategies. A lot of them have very particular ways that they view companies and engage with those companies on certain metrics that are tied to where an ESG metric is more material to their business value.

Different ones have different kinds of focuses. Generation is a well-known one that stock picks based on their really strong research into sustainability trends, then works actively with those companies towards those goals. Ownership Capital is another one. They’ve got a slightly different lens. They are not so large-cap-focused. Crazy markets the last couple months aside, both of them have had really great long-term performance.

Then there are some that are really fun that are starting to get over on the activist side. Engine No. 1, Impactive — their approaches with management are more activist. That active strategy [could mean] working with a good company and making them better, or selecting based on that company’s own bias towards sustainability or best practices in good governance or good labor practices or things like that. In that case, some of the managers are contributing to increasing the impact of what that investment is doing. But in some cases, we’re along for the ride. We are investing in companies that are good companies, and that’s OK with me. I’ve got enough to allocate. I don’t need everything to be better just because we invested in it. In those cases, we’re just happy to find managers that can find those companies and invest in them.

Klein: Can you describe more about what this active strategy is? What does that look like in practice? What is an investor, a fund manager doing vis-a-vis different companies?

“I think that things work well when you have this healthy dance between markets, government, regulation, private sector, public sector.”

Pritzker Simmons: It depends on the manager. We try to have a diversity of approaches, as well as what they end up picking, so that we don’t get overconcentrated in just the one company that everybody thinks is great. Some of them are actively working with management teams of the companies that they are owning. We tend to prefer managers who are not just focused on ESG metrics because they’re good to have or a box to tick, but who actually think that these companies are leaving value on the table if they don’t pay attention to them. Those tend to be the types of managers that we like, so they tend to do well with companies because they have the same goal, which is, “How do we get more value out of this?” Things like paid parental leave actually increase productivity. Finding those areas where something has been understood to be a trade-off, we find those teams can do well.

That’s over on the active side. On the passive side, we have used over the years a number of different services providers on the ESG front, all of which have their benefits and issues. We try to do negative and positive screens. We try to reduce tracking error here or there when we can, and there are a number of different services that do that now. We back-check it, too. We audit that portfolio to see what else is actually in there. But that’s one I would say that is definitely not the most exciting part of our portfolio. It’s in the “do no harm” category. But I think it’s important to have in there and to pay attention to because that’s where most of the money in the world is, right? It’s in those capital markets. I think there is more and more work being done around trying to get those standards and those metrics to be less noisy, to be more meaningful, and to get disclosures to be standard. The number of organizations that are working on that, we’ve supported through our grant portfolio because we want help on that, too. We’re investors, and we’re really confused.

There is work to be done. I also think that impact investing and ESG, everybody keeps wanting a list. They just want a list. And they’re never going to get a list of “these are the good guys and these are the bad guys.” You actually have to do the work and look under the hood, as you do with any investment. There could be a bit of greenwashing, but I think we’ve had snake oil salesmen for thousands of years.

Klein: That’s a very helpful perspective. I have sometimes described myself as an optimistic skeptic or a skeptical optimist. I’m hearing that from you.

Pritzker Simmons: Yeah, that’s the thing. The data can always get better, but it’s not going to make the decision for you. You have to put a little bit of thought behind it. What is that information telling you against your own goals? If you’ve got a large portfolio and need some liquidity in it, you are going to be looking at public markets. In that case, you want information that can help you make the best choices. If you can be holier-than-thou and only invest in perfect, brand-new startups, good for you. But a lot of people can’t do that. They have other cashflow constraints. I think just pooh-poohing the ESG market is not going to help.

Klein: Let’s turn to some of Blue Haven’s civic engagement, specifically some of the advocacy you’ve done around a wealth tax. A few months ago, you and Ian, your husband, had a Time editorial with the title, “To Build Back Better, Tax Ultra-Wealthy Families Like Ours.” Now, you’re not the only ultra-wealthy family saying this. There’s obviously a lot of push-back, not only from the ultra-wealthy. Why are you advocating for this? And what’s been the response?

Pritzker Simmons: The wealth tax work has been really interesting. I like markets. I like capitalism. I think it has produced massive amounts of wealth for people like we’ve never seen. As a system, broadly speaking, it has raised the standard of living globally in a pretty incredible way. That and technological revolutions go hand in hand. I’m not saying that we should get rid of wealth entirely and redistribute everything. I’m not a socialist.

But I think that things work well when you have this healthy dance between markets, government, regulation, private sector, public sector. When you’re able to strike that balance. What we’re saying is we think it’s gone a little bit out of whack, and it’s time to bring it more back in line with when America was growing the fastest, in the 1950s and 1960s, and that post-war era. It was best for economic development. Wages were growing, we were reinvesting back in our own public. We had all kinds of major works focused on education. There were all sorts of programs that I think really set the country up for success. Things were a little bit more in balance between the power of the private markets and the power of the government.

“Don’t get caught up in hype cycles… You’ll run yourself ragged trying to keep up with what you think the cool kids are doing.”

That’s more where we’re trying to go. I’m not saying that we should all be socialists. Sometimes we get accused of that. Our effective tax rate is 2.7%. Let’s get it to 4%. It’s really not that radical when you actually explain to people how little of your wealth you’re paying, legally. All we’re trying to do is highlight that.

There are a lot of different ways we could do that. Capital gains have got to be a part of it. Things like a wealth tax, because just taxing income on very wealthy people doesn’t make a lot of sense. That isn’t how they earn their money. There are ideas around doing a one-time tax on unrealized gains, unless you are the founder of the company, like with the Wyden proposal. There are a number of things that you could do in order to be very targeted. You’re talking about a very tiny percentage of a tiny percentage of Americans. And this is also where things get a little out of whack. We’re a very aspirational country, so I see a lot of people against a wealth tax who are never going to pay it. But theoretically, one day they could. That’s very off-putting.

Let’s also reduce military spending, let’s make government more efficient. There are all kinds of ways to pull at these purse strings. But from our perspective, we felt that we have a unique voice in this area of this tiny percentage of people who are not paying even close to the share of taxes that most Americans are paying. We think they should. That’s all. Get it a little bit closer to what other Americans are paying and the burden that they feel.

Most people are very supportive of it. It was the most popular component of Build Back Better when they polled people. The majority of Republicans support a wealth tax. It’s really quite popular. One of the things that we helped fund was polling on this because everyone just assumed it was dead in the water. We were able to give that data to lawmakers, and they were actually quite surprised, and then more of them came on board.

Klein: You’re at about a 10-year anniversary with Blue Haven Initiative. What are the one or two most important lessons learned?

Pritzker Simmons: Doing something instead of waiting for it to be perfect. I think that has been a big lesson learned. If you wait for the perfect framework to come along, you’re just going to get stuck.

Klein: What’s grabbing your attention now?

Pritzker Simmons: One of the things that we’re excited about but cautious around is all of this energy around crypto, blockchain, Web3, all of that. We’re in the middle of a big hype cycle, but there are interesting use cases where it intersects with what we are doing in different markets. I’m waiting for things to calm down a little bit and for actual use cases to start to rise. Where do those technologies make things safer, cheaper, more efficient? And where are they a total distraction? That’s one thing we’re keeping an eye on now. I’m taking a bunch of blockchain classes and looking at seeing where there are use cases.

Klein: I’m thinking of the Wharton students, our undergraduates, our MBAs, who are the future leaders of finance. What would you like them to understand?

Pritzker Simmons: Stick to the fundamentals of what the business is doing. Is it growing in a sustainable way, meaning the business word “sustainable”? And don’t get caught up in hype cycles, whether it’s in traditional venture, whether it’s in impact investing, whether it’s in any of this. You’ll run yourself ragged trying to keep up with what you think the cool kids are doing. The regular fundamentals of solving a business problem are pretty interesting and pretty great. And there is nothing the matter with making something that people want, whether it’s a good or a service, for less money than you sell it to them at. Some of those very traditional business models, I’m seeing people rediscover. You don’t have to do a traditional VC fund that probably will go to zero. I think refocusing on fundamentals and finding the innovation and excitement in that is very refreshing these days.

Investing with Impact: Becoming a ‘Responsible Steward’

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